Interviews

(Kitco News) - Continued electrification of the global auto sector will provide critical support for the technology metals sector, according to one market analyst.

Bodo Albrecht, tech metals specialist

In an interview with Kitco News, Bodo Albrecht, tech metals specialist, said that he sees the tech metal sector starting a new bull cycle as demand from the auto sector is expected to pick up.

“The long-term uptrend is unstoppable,” he said. “The world’s population is growing; demand for electronics will grow, but what won’t grow is the supply of raw materials.”

Tech metals make up a relatively new commodity sector, used to describe the metals and rare earth elements that are used in electronics and sustainable energy. These commodities can be found in everything from smart phones, flat screens to cars and homes.

Albrecht said that one specialty metal that he likes is rhodium, which is also part the platinum group metals. Rhodium is a critical component in catalytic converters, which, along with palladium, is used in gasoline and hybrid vehicles.

“Rhodium is the metal that people need to be looking at and talking about,” he said. “I think we are just starting to see the metal take off.”

Rhodium has been the best performer within the precious metals market and is currently up 38% since the start of the year, last trading at $2,185 an ounce. The price is up 280% since its lows in 2016.

Albrecht said that he sees strong demand for hybrid vehicles -- that run on both electricity and fuel – as countries, notably China, implement stringent environmental policies. He noted that hybrid cars are currently the best transition between gasoline vehicle and fully electric vehicles; they are attractive to consumers who are concerned about range limitations with electric cars, he explained.

He said that he also expects the popularity of hybrid vehicles will grow as gasoline prices are expected to rise. So far this year, gasoline prices are up more than 11%, according to data from the U.S. Energy Information Administration.

Along with rhodium, Albrecht said that he also likes gallium, which is a critical component in semiconductors. He added that demand for this metal is expected to continue to grow as consumers look for more computing power in their electronics and computers.

While there is growing potential with the tech metals sector, Albrecht said that investors need to have a specific long-term mindset when creating a position.

“It’s not like gold where you can have a short-term view and get in and get out quickly,” he said. “These markets are fairly small and can be volatile, so you have to focus on the long-term trend.”

Not only is demand for tech metals expected to grow, but Albrecht said that he sees the potential for supply disruption as the U.S. escalates its trade war with China, which has massive stockpiles in some of these metals.

“[President Donald] Trump is starting a trade war with a country that holds 85% of the supply of these critical metals,” he said. “This could go very bad for some companies very quickly if the trade war escalates.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.